Trust Deed Pros & Cons
Think a Trust Deed might be the right solution for you?
If you’re considering a Trust Deed, you can read about the pros and cons of this debt solution below.
If you have any questions about Trust Deeds, or if you want advice about what help might be available for you, please get in touch with our friendly debt advisers.
You can call us FREE on 0800 280 2816, or use the ‘Get advice now’ button below to request a callback.
Advantages of a Trust Deed
- One single affordable payment
- You make one single affordable payment every month, and this will cover your creditor repayments and any fees relating to the Trust Deed process. Rather than making multiple debt repayments, it’s much easier to focus on one affordable monthly payment.
- It’s affordable
- Trust Deed payments are based entirely on what you can afford. Your debt adviser will go through your income & expenditure with you, and together you will make a proposal based on your surplus income after your household bills have been taken care of. You won’t have to get further into debt to make your creditor payments, as they will be entirely based on what you can afford – and there may be a degree of flexibility if your income changes whilst you’re in the Trust Deed.
- Peace of mind
- As long as you keep to the Trust Deed agreement, and make your monthly payments as agreed, after the Trust Deed period has ended, your unsecured creditors will write off the rest of your debt. You can enjoy the peace of mind that in four years (assuming your agreement is four years, as most Trust Deeds are) you will be completely free of all the debts included in your Trust Deed.
- Legal action is stopped
- If you apply for a Protected Trust Deed and your creditors approve it, they won’t be able to take any further legal action against you. You will also be protected from sequestration with a Protected Trust Deed.
- Your Trustee will handle everything
- Your debt adviser will help you every step of the way throughout your Trust Deed application process – and once it has been accepted, your Trustee will manage all creditor communication for you. This takes away a great deal of pressure from you.
- Frozen interest and charges
- You make a commitment to pay an affordable monthly sum, and by law your unsecured creditors are not permitted to add further interest or charges to your debt.
- Your home
- When you initially propose a Trust Deed you will already know how any equity in your home will be handled and you usually have the option to extend your Trust Deed by another year if you don’t want to or can’t afford to remortgage. Normally, protected Trust Deeds are a way to avoid selling your home (unlike sequestration). You can find out more about trust deeds and your home here.
- If you experience a genuine change in circumstances (for example if you lose your job), it is possible to apply to reduce your monthly Trust Deed payments to a level you can afford.
- Continuing to trade
- If you run your own business, you are more likely to be able to continue to trade in a Trust Deed than if you apply for sequestration.
- Discharge from debts
- As long as you keep to all the terms of your Trust Deed, you will be discharged from all the debts that are included in the Trust Deed when your Trust Deed finishes. Trust Deeds are normally between 4 and 5 years in length, depending on your own individual financial circumstances.
Disadvantages of a Trust Deed
- Credit rating
- A Trust Deed will affect your credit rating, as it will be recorded on your credit file for six years from the date it is approved. You should be aware it could impact your ability to get credit – however there will normally be some quite strict limitations on your ability to apply for credit whilst in your Trust Deed anyway.
- Trust Deed register
- Your Trust Deed will be recorded on the publicly available Register of Insolvencies.
- Missed payments
- If you miss payments – or fail to stick to any other parts of your Trust Deed agreement – your creditors could petition for your sequestration.
- Windfalls will normally be expected to be offered as contribution towards your debts, in addition to your agreed monthly Trust Deed payments.
- A Trust Deed may affect your job, particularly if you work in a financial position.
If you are struggling to pay your debts and want help and advice, get in touch with PayPlan.
All our advice is completely FREE, and we will help you find the right debt solution for you.